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Marginal Effects of Merit Aid for Low-income Students

Despite the investment that colleges and universities make in financial aid, there is relatively little research into how that aid affects outcomes for low-income students. In a new working paper, researchers Joshua Angrist and David Autor of MIT, and Amanda Pallais of Harvard set out to measure the effects on four-year college completion rates. Working with a foundation that provides generous financial aid awards, the researchers randomly assigned awards to thousands of Nebraska high school graduates "judged capable of college-level work" from low-income, minority, and first-generation college households.  The aid boosted bachelor’s degree completion rates by eight points for students attending four-year colleges, compared to those who didn’t receive awards. 

The researchers also found that the highest concentration of benefits was among students who would have been unlikely to enroll in four-year programs, or unlikely to complete four-year programs without the additional support. What made the biggest difference, the researchers found, was that the awards influenced the credit unit earned toward a bachelor’s degree in the first year of study. In other words, aid is effective when it promotes early and deep engagement with a four-year college program. This implies that there are other beneficial and less costly interventions that may yield the same results as the generous aid granted in this study.
By Vasilisa Smith